Federal appeals court: Obamacare birth control mandate could be struck down

Customers a Hobby Lobby store in Denver in May. The company is challenging a federal mandate requiring it to offer employees health coverage that includes access to contraception.

By M. Alex Johnson, staff writer, NBC News

A federal appeals court sided Thursday with a company challenging President Barack Obama's health care reform law, saying an Oklahoma company is likely to win its claim that requiring for-profit companies to pay for birth control is a violation of religious protections.

The 10th U.S. Circuit Court of Appeals in Denver waived millions of dollars of fines against Hobby Lobby Inc. and a subsidiary company, Mardel Christian Stores, which have refused to comply with the mandate while they seek an exemption under the Religious Freedom Restoration Act, or RFRA.

The companies, which close all their stores on Sundays, say they are founded on "honoring the Lord in a manner consistent with Biblical principles."

"We hold that Hobby Lobby and Mardel are entitled to bring claims under RFRA, have established a likelihood of success that their rights under this statute are substantially burdened by the contraceptive-coverage requirement, and have established an irreparable harm," the court said in a 165-page ruling. The court sent the companies' case back to the U.S. District Court in Oklahoma City, which had previously turned down the companies' request.

Many religious organizations are challenging the Patient Protection and Affordable Care Act, which the Supreme Court upheld exactly one year ago Friday. They argue that the law's mandate that employers pay for birth control as part of required health care benefits violates their religious beliefs.

In the case the 10th Circuit addressed Thursday, Hobby Lobby — which has more than 13,000 full-time employees at more than 500 stores in 41 states — seeks to extend the same argument to public, for-profit companies, as well.

In arguments this week, the Obama administration contended that such an exemption would render the provision meaningless.

"The context of RFRA makes it abundantly clear that Congress did not give for-profit corporations the right to evade federal regulation in the name of their shareholders' religious freedom," the Justice Department argued this week.

"As Congress understood, extending religious exemptions to for-profit corporations would impermissibly advance religion to the detriment of the employees, who are autonomous human beings with rights and beliefs of their own," it said.

If Hobby Lobby eventually prevails, it could open the door for several other prominent U.S. corporations that call themselves biblically based to seek similar exemptions.

Other major companies led by deeply conservative families or boards include Tyson Foods, one of the world's largest poultry processors with 107,000 U.S.-based employees; ServiceMaster, parent of such cleaning brands as TruGreen ChemLawn and Terminix, which has 58,000 full-time corporate and franchise employees; and Chick-fil-A, which operates more than 1,600 U.S. restaurants.

Kyle Duncan, general counsel for the Becket Fund for Religious Liberty, which represented Hobby Lobby in the case, called Thursday's ruling "a tremendous victory not only for (Hobby Lobby), but also for many other religious business owners who should not have to forfeit their faith to make a living."

But Barry Lynn, executive director of the nonprofit advocacy group Americans United for Separation of Church and State, called it "the worst kind of religious oppression."

"This court has taken a huge step toward handing bosses and company owners a blank check to meddle in the private medical decisions of their workers," he said.